FleetPros Blog

I’m relatively sure that by now there isn’t a governmental fleet left in America that hasn’t been faced with the reality of deep budget cuts and possible lay-offs, in fact, the privatization issue may have surfaced once again in your organization. If you’re like me, I daily question “when will we hit bottom and what will be left when we get there?” As executive management struggles to control cost, they have once again focused upon fleet. Although this might be an uncomfortable situation, it does not necessarily mean that you have to reduce people or parts, but you do have to think outside the box. The goal is to reduce cost to the enterprise, most executive management teams will be open to innovative ideas to address the issue, in fact, modern fleet managers need to be aware and nimble enough to embrace this strategy to survive.

I’m going to give you a solution that has work for the City of Mesa and with a little tweaking, it just might be work for you.

Warranty Recovery and Reimbursement Program

Sounds like an old idea? well that could be said about such technical innovations as regenerative braking, an innovation from 1909, forgotten for almost 100 years and today used in most hybrid drive vehicles.

Remember what our mentors use to say about ideas? ”it’s all in the timing”…..well, the time has arrived.

Extended Warranty – usually purchased as a premium and extends the basic standard warranty in either time, mileage or both

Policy Adjustment – is a mutual agreement between the agency and the OEM, whereby adjustments are made to cover chronic failures, latent defects, and problems that occur over and above the basic and extended warranties

Facts:

Some dealers do not have a good understanding of the OEM’s warranty program, many do not truly understand how to submit claims properly

Many dealers will submit claims but will quickly pushback to the customer if they are denied

Some fleets don’t become warranty repair centers because they do not truly understand the benefit or processes involved

Many fleets internalize potential warranty repairs due to the inconvenience of moving vehicles to warranty repair centers.

Some fleets do not have a good understanding of the potential revenue recovery associated with warranty

Many fleets have not developed resources to manage a warranty reimbursement program

City of Mesa’s Program:

Fleet establishes a yearly warranty recovery goal

Ensures that all vendors understand warranty recovery is important to the City.

All bid documents state that the vendor must certify Mesa as a warranty repair station as a condition of bid.

Vendors must state their Basic Standard & Extended Warranties by vehicle system in bid submittals.

Bid documents state the City’s required labor recovery rate in all new equipment contracts.

Fleet carefully monitors each protocol, if the vehicle must actually go to the vendor, Fleet uses a driving service so that valuable technicians are not removed from other work

A program is instituted for each vendor to track submittal dates, repair details, cost recovery etc.

The City prefers cash reimbursement, but will sometimes accept parts in lieu of cash

Fleet has set up customers to receive the cash reimbursements passed from Fleet to the customer’s programs

A weekly online report is produced for customers so they can track the status of open warranty claims, see the magnitude of their cost avoidance and their weekly revenue.

How Does this Program Benefit Fleet?

Proves to clients that Fleet will work hard to reduce their operational cost. We recognize them as valuable customers

Warranty recovery is not something a contractor would normally provide to the customer, in fact, many times recovery dollars are declared profit by the private fleet contractors.

The program depicts to executive management and council that both Fleet and customer departments are good stewards of tax dollars.

Challenges:

Vendor push back – there’s no money in it for them, they will fight hard to save every penny, this never gets easier.

Timelines – Establish timelines and hold the vendor to them or you will get nothing.

Expect problems – the vendor will debate much, don’t lose your cool.

Record keeping is everything – it’s the only proof that you have.

Keep photos and video of problems so they can be discussed, especially if you have to elevate the problem.

Keep the old parts if the agreement specifies such, email the vendor for written instructions before disposing anything...a paper trail helps.

Know how much you spend with each vendor in both new vehicles sales and parts; use the possibility of future business as a tiebreaker…if you have to.

Express your appreciation for extended warranty situations, it will get you far.

Always be fair, the OEMs are in business for profit, get what you require and no more.

Never accept NO…..use another approach.

City of Mesa - Magnitude of Annual Savings:

In-house completed warranty claims: $105,023

Vendor completed warranty claims: $290,786

Parts recovery: $ 38,017

Total Recovery & Cost Avoidance: $433,826

Summation:

During time of shrinking resources, it is vitally important that Fleet institute additional cost saving measures such as warranty reimbursement.

It is important that our customer departments, Executive Management and the Council see the value of Fleet’s commitment to lowering cost by displaying monthly cost savings reports

Valuable Reference Text:

Warranties Planning, Analysis, and Implementation by James R. Brennan

BiographyPete Scarafiotti has been in fleet management for the past 32 years, managing large fleets in both the private and governmental sectors. Pete has a BS in Mechanical Engineering and an MS in Engineering Management; he has also attained the four major fleet certifications. You can contact Pete at pete.scarafiotti@mesaaz.gov

Have you ever watched a ballgame from the sidelines and knew what the coach should have done thatwould have resulted in a better outcome? I am guilty as charged. Building a team and having everyone on the same play at the same time is not the easiest task, but it can be done. It requires a common vision and everyone knowing the game plan. As important, it requires the entire team to work as a team for the common goal. It is true that every team must have a coach. All professional teams have a head coach, specialty team coaches, and team players. Each person on the team is an integral part of the team and has specific tasks that they need to accomplish. The coaches develop the plans and provide guidance and direction during the game. The players execute the plays and, together, win the game. No one person makes the plays or wins the game by themselves. Motivation, excitement, and dedication are common threads on the team.

Building a great team is done by including people with all types of talents. Each member of the team has unique skills, talents, and strengths. Not everyone is the best at doing everything. In the book the Strength Finder, we are challenged to find our strengths and use them in a positive manner. Instead of trying to improve every weakness we have, we should find others that have the strengths that we don’t and build a well balanced team, together. We tend to think of our weakness as a short coming, but we should see this as an opportunity to allow others with the strengths to join the team and fill in any gaps. Without help, you might find the project or committee you are trying to lead flailing, or taking longer than you expected. Let those with the strength come forward and the team will be better for it.